Case 21 – Freemark Abbey Winery
MANA 6302: N1
Professor: David Jones
Mrunalini Patel
November 15, 2015
Executive Summary
The Freemark Abbey Winery is a company that grows grapes in St. Helena, California, in northern Napa Valley, for wine production. Wine taste and market value are greatly affected by the sugar and acidity level of the grapes during the harvest. Grapes for Freemark Abbey Winery come from central and southern part of the valley which has an ideal climate. Only the best grape varieties are used by the Freemark Abbey to produce premium wines. It produces 25,000 cases of wine bottles each year, majority of which included Cabernet Sauvignon and Chardonnay. It also produces 1000 cases of Riesling and one case contains 12 bottles of wine.
In September 1976 Mr. William Jaeger, a member of the partnership of Freemark Abbey Winery, was faced with a storm that was moving toward the vineyards in California. Jaeger needed to decide whether to wait for the storm and potentially have a good crop of Riesling grapes with added risk of lower revenues or harvest the grapes before the storm hit and…
Jaeger is to wait for the storm to pass before picking the grapes from the vineyard. Even though this option is risky, it does provide higher average probable revenue compared to harvesting before the storm. It is also important to consider that the Riesling accounts for only 4% (1000 bottles of total 25,000) of the total wines produced by Freemark Abbey and any risk would represent a small effect on the total revenues. Freemark is worried about their reputation in the marketplace. Even in the worst situation, the winery could sell the wine at wholesale or sell the grapes which would bring enough revenue to cover the cost of vinification, according to the case. In this situation, it might be a strategic option to take the risk and not harvest grapes before the storm for potential higher…